Untimely LNG contracts: Auditor General finds wastage of billions

KARACHI: The federal government has inflicted a loss of billions of rupees to the nation in the LNG sector ever since it came to power in 2018 but continues to deny that. In the first two and a half years, it gathered losses to the tune of Rs122 billion, and so far in 2021 has inflicted a financial damage of Rs35 billion by repeating the past trend of mistakes. This was the crux of an analysis by Shahzeb Khanzada in Wednesday’s show of Geo News programme ‘Aaj Shahzeb Khanzada Kay Sath’ (ASKKS).

When the issue of needless wastage of resources was raised last year by the Geo News, the federal government, instead of addressing the issue, came down hard against the Jang-Geo Group. However, the Auditor General Pakistan, in his latest report, has confirmed the facts presented by the ASKKS related to delay in purchasing LNG, loss of billions of rupees, all of which led to a gas crisis of epic proportions and justifies the stance of the Geo News.

The AGP, in his 2020 audit report, found it disturbing that LNG for December 2020 was contracted at a rate of USD6.7 MMBTU very late in November, which in futures was earlier available at USD4.38 MMBTU. The report laid the blame for the problem to ignoring the historic trend of winter gas consumption in the country as well as international market trends. The LNG prices were increasing sharply from July to Oct 2020.

The crisis reflected on poor planning by the inept wizards at the relevant ministries for contracting LNG at spot rates, ignoring the futures all of which boiled down to the loss of Rs7.7 bn. Shahzeb reminded that back in December 2020, the ASKKS had highlighted the issue.

Similarly, the AGP also discussed the losses of Rs1.65 billion incurred in tenders for spot purchases in August and September 2020. The audit found that the tenders for August were floated in the same month and the sale was contracted at USD3.6 MMBTU while for September the delivery was contracted at USD4.65 MMBTU. Had the supplies been contracted in July, the losses would have been averted, the audit report concluded. At that time, when the Geo News had asked ex-SAPM Nadeem Babar, he held the K-Electric responsible. The news channel also produced the factual position that the Karachi power utility company had ‘timely raised’ its requirements, which is now being confirmed by the AGP report.

The report also cites the losses of Rs1.31 billion when the demand was timely raised but the tenders were floated with delay due to which the suppliers refused to oblige and emergency tenders were floated and then historic high bids were received. All of this precipitated in a massive power and gas crisis as the electricity production was generated through expensive furnace oil due to bad planning, the AGP report reveals.

In 2020 winter, the wizards announced that Pakistan confronts peak demand for six weeks only. The AGP has found that the government paid over Rs11 billion from its kitty for not adequately using the LNG terminals. Had the terminals been used to full capacity through private sector, the additional expenses in billions of rupees could have been averted, the AGP report says.

Last year, it was said gas was not required and now it is being said that the problem arose due to NAB cases. When asked, NAB rejected the government's version, saying they never stopped the government from fully utilising the LNG terminal to its full capacity. However, this year as of now, the federal government has decided to utilise the LNG terminal to its full capacity.

The prime minister must investigate and hold those responsible for the needless LNG crisis created in the last three years. He must also find out as to why the last year mistakes are being repeated once again now; once again his government would face the music.